Ms Amalle Halabi v The Star Pty Limited

[2014] FWC 1945

[2014] FWC 1945

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394 - Application for unfair dismissal remedy

Ms Amalle Halabi
v
The Star Pty Limited
(U2013/7754)

COMMISSIONER CARGILL SYDNEY, 31 MARCH 2014

Application for costs

[1] On 19 February 2014 I issued a decision which dealt with an application for an unfair dismissal remedy made by Ms A Halabi (the applicant) pursuant to section 394 of the Fair Work Act 2009 (the Act). In that decision I determined that the applicant had been unfairly dismissed by The Star Pty Limited (the respondent). I also determined that I should award a remedy and ordered compensation of an amount of $42,913.89 gross.

[2] On 27 February 2014 the applicant made an application for an order for costs against the respondent. The application is made on two bases: section 400A and section 611 of the Act. The application was made within the 14 day period required by section 402.

[3] The application in large part relies on the dealings between the parties prior to the arbitration of the matter and, in particular, the respondent’s rejection of a settlement offer put by the applicant. In order to understand the submissions it is necessary to set out the relevant chronology which, as I understand, is not disputed.

[4] The applicant’s claim was filed on 21 March 2013. A conciliation conference was held by a Fair Work Commission (FWC) Conciliator on 18 April 2013. By letter dated 17 May 2013 the respondent’s legal representatives made an offer of settlement to the applicant in the amount of $7,500 gross. In correspondence dated 20 May 2013 the applicant’s legal representatives rejected the respondent’s offer and made a counter offer of $22,500 gross plus a resignation. This offer was expressed as being a “Calderbank” offer.

[5] The applicant’s offer was initially open for a period of seven days but was subsequently extended to 5 June, then to 12 June. Each extension was at the request of the respondent’s legal representatives. In an email from those representatives dated 12 June 2013 the respondent rejected the applicant’s offer.

[6] Meanwhile the submissions and witness statements in the applicant’s case had been served on the respondent on 22 May 2013. Relevantly for present purposes that material included statements from the applicant and a Ms Nguyen.

[7] As with the arbitration of the substantive application, the applicant was represented in the costs hearing by Mr Lynch, solicitor and the respondent by Mr Seck of counsel.

SUBMISSIONS ON BEHALF OF THE APPLICANT

[8] It is submitted that the respondent’s rejection of the applicant’s settlement offer constituted an unreasonable act which directly resulted in costs being incurred by the applicant. The actions of the respondent in this regard left the applicant with no choice but to incur costs for the hearing of the matter with proceedings extending over three and a half days.

[9] The applicant was successful in her claim and the amount which was awarded by the FWC was substantially higher than the applicant’s offer of settlement. Consequently, the applicant submits that an order pursuant to section 400A of the Act for costs on an indemnity basis should be made. The costs sought are those incurred by the applicant in the period from 20 May 2013, the date of the offer, up to the date of the decision and order, 19 February 2014.

[10] In the alternative, it is submitted that, from the date of the respondent’s receipt of the statements of the applicant and Ms Nguyen, it should have been aware that both were clear that the applicant did not know that there were no customers at the Spa until after she had her treatment. It follows that it should have been apparent to the respondent that there was no reasonable basis for its claim that the applicant had engaged in misconduct. The decision found there had been no misconduct.

[11] It is submitted that it follows that, as of 22 May 2013, it should have been reasonably apparent to the respondent that its response to the applicant’s claim had no reasonable prospect of success. This is reinforced by the fact that the applicant’s offer remained open for two further weeks after 22 May. Costs on an indemnity basis should therefore be awarded pursuant to section 611 of the Act for the period 22 May 2013 until 19 February 2014.

[12] In his oral submissions Mr Lynch referred to and relied on two decisions: Nunan v Beach Building & Civil Group Pty Ltd [2010] FWA 9761 at paragraph 12 (Nunan) and Mifsud v Veolia Transport Sydney Pty Ltd [2012] FMCA 167 at paragraphs 48 and 49 (Mifsud). Mr Lynch submitted that Nunan made it clear that it was open for me to determine that, because the amount awarded to the applicant was in excess of the applicant’s offer, the respondent had acted unreasonably in rejecting that offer.

[13] In Mifsud, the Federal Magistrates Court had found that a failure to respond to an offer of settlement amounted to an unreasonable omission. Mr Lynch submitted that the respondent’s rejection of the applicant’s offer in this case should be similarly seen as an unreasonable act. In Mifsud, as here, a Calderbank offer had been put and whether there was no response or a rejection of the offer both steps were unreasonable.

[14] Mr Lynch submitted that the respective positions of the parties was a relevant consideration in the matter. He noted that the respondent had been legally represented from an early stage and was an entity with significant financial means. The applicant was not.

SUBMISSIONS ON BEHALF OF THE RESPONDENT

[15] The respondent refutes the applicant’s claim that it acted unreasonably in relation to the matter and that it had no reasonable basis for defending the application. It opposes the application for costs.

[16] The respondent submits that the relevant test under both section 400A and section 611 as to the “unreasonableness” of the party’s conduct is an objective one. It involves a consideration of all of the circumstances of the case.

[17] The respondent refers to the recent Full Bench decision of Roy Morgan Research Ltd v Baker [2014] FWCFB 1175 (Roy Morgan). It notes that costs were awarded in that matter on the basis that the appellant had presented no evidence to support an important part of its case and, in addition, had not heeded a warning from the FWC about the slim prospects of its appeal which had been made during the stay application.

[18] The respondent notes that the Full Bench cited an earlier decision, Brazilian Butterfly Pty Ltd v Charalambous (PR968915). The respondent submits that several of the circumstances identified at paragraph 43 of that decision are still relevant and should guide the outcome in this matter. In particular, the terms of settlement offered, the relative strengths of the parties cases, the likely length and cost of proceedings and the adverse consequences for each party if they had settled rather than successfully prosecuted or defended the primary application.

[19] The respondent notes that the Full Bench had distinguished the situation before it where there was a failure to provide relevant evidence from a case which involved finely balanced evidence and an assessment of competing considerations. The respondent notes that the Full Bench determined that “without reasonable cause” meant “manifestly groundless” or “so obviously untenable” that there was no chance of success.

[20] The respondent submits that the present case is very different to the situation in Roy Morgan. The respondent here had provided a substantial amount of evidence to support its case. Ultimately there was a determination in which the evidence of the applicant and Ms Nguyen was preferred over the evidence of the respondent’s witness, Ms McCormack. The respondent notes that there was no adverse finding about Ms McCormack’s credibility.

[21] The respondent submits that it was entitled to accept that its witnesses were telling the truth and that their evidence supported a credible defence of the applicant’s claim. It did not act unreasonably in this regard.

[22] Mr Seck rejected the applicant’s reliance on Nunan and Mifsud. He submitted that an assessment of the reasonableness of a party’s actions should not depend on whether or not there is a disparity between an offer of settlement and any award of compensation. Mr Seck submitted that the respondent’s actions in this case in carefully considering the applicant’s offer, including seeking further time in which to do so, is in stark contrast to the employer in Mifsud making no response at all.

[23] Mr Seck submitted that the absence of any adverse findings as to the credit of the respondent’s witnesses and the fact that the case turned on the preference of one person’s evidence over another supported a conclusion that the respondent had not acted unreasonably. He submitted that these factors also reinforced the respondent’s position in defending the applicant’s claim. It could not be said that its case had no reasonable prospects of success.

CONCLUSIONS

[24] The relevant statutory provisions for consideration in this matter are as follows:

“Section 400A Costs orders against parties

(1) The FWC may make an order for costs against a party to a matter arising under this Part (the first party) for costs incurred by the other party to the matter if the FWC is satisfied that the first party caused those costs to be incurred because of an unreasonable act or omission of the first party in connection with the conduct or continuation of the matter.

(2) The FWC may make an order under subsection (1) only if the other party to the matter has applied for it in accordance with section 402.

(3) This section does not limit the FWC’s power to order costs under section 611.”

“Section 611 Costs

(1) A person must bear the person’s own costs in relation to a matter before the FWC.

(2) However, the FWC may order a person (the first person) to bear some or all of the costs of another person in relation to an application to the FWC if:

(a) the FWC is satisfied that the first person made the application, or the first person responded to the application, vexatiously or without reasonable cause; or

(b) the FWC is satisfied that it should have been reasonably apparent to the first person that the first person’s application, or the first person’s response to the application, had no reasonable prospect of success.

Note: The FWC can also order costs under sections 376, 400A, 401 and 780

....”

[25] The Full Bench in Roy Morgan dealt extensively with both sections 400A and 611. Another recent Full Bench in Church v Eastern Health t/as Eastern Health Great Health and Wellbeing [2014] FWCFB 810 (Church) also analysed the meaning of section 611 and provided helpful guidance in that regard. I adopt and follow the approach of both Full Benches in this matter.

[26] In essence, the applicant’s claim for costs pursuant to section 400A is that the respondent’s action in rejecting her settlement offer was unreasonable especially in view of the fact that she was ultimately awarded substantially more than the amount that she had put forward in her offer.

[27] It should be noted that two important features in the Roy Morgan matter were not present in this case. First, there was no warning or indication from me, or any other Member of the Commission as far as I am aware, that the respondent had a weak or barely arguable defence to the applicant’s claim. Indeed, as at the time the respondent rejected the offer, the matter had not been allocated to a Member for hearing.

[28] Secondly, this is not a case where the respondent failed to put evidence to support its contention that the applicant had engaged in misconduct and that her dismissal was not harsh, unjust or unreasonable.

[29] It is true that, as at the date upon which the respondent rejected the applicant’s settlement offer, it was in possession of the statements of both the applicant and Ms Nguyen. However, the respondent subsequently produced a considerable amount of evidence, some of which was to the effect that the applicant and Ms Nguyen had made admissions during the disciplinary process that the applicant had been aware before her treatment that there were no customers at the event at the Spa.

[30] I ultimately preferred the evidence of the applicant and Ms Nguyen on this point, however, that was a conclusion reached after careful consideration of all of the evidence. In stating this finding I made it clear that I did not consider that the respondent’s witness had been untruthful in her evidence. Rather, in my view, it was probable that the difference in the evidence arose from different recollections of what had been said in the meetings.

[31] If my finding on the evidence had fallen the other way it may have led to a different outcome either in relation to the question of whether the dismissal was harsh, unjust or unreasonable or alternatively, a much lower award of compensation.

[32] I do not consider that the respondent’s action in rejecting the applicant’s offer was anything more that hard bargaining on its part. It was not an unreasonable act. I also note that, in addition to monetary compensation, the applicant’s offer sought that her dismissal be treated as a resignation. There is no jurisdiction for making an order for costs pursuant to section 400A.

[33] The applicant’s claim under section 611 is focused on section 611(2)(b). The applicant says that it should have been reasonably apparent to the respondent that its response to her claim had no reasonable prospect of success. This is said to be especially so after the receipt of the applicant’s evidence.

[34] The phrase “without reasonable cause” in section 611(2)(a) is dealt with in both the Roy Morgan and Church decisions. It is noted that the test is not whether the application, or in this instance the response, might have been successful but whether it should not have been made. The Church Full Bench notes that the courts have observed that the test is similar to that adopted for summary judgement, that is “so obviously untenable that it cannot possibly succeed”, is “manifestly groundless” or “discloses a case which the Court is satisfied cannot succeed”. Similar observations can be made about the phrase “no reasonable prospect of success” in section 611(2)(b)

[35] The respondent’s case in the arbitration of the applicant’s claim did not suffer from the ills identified in the previous paragraph. It cannot be said that its response had no reasonable prospect of success. There is no jurisdiction for the making of a costs order pursuant to section 611.

[36] The application for costs is dismissed. An order to that effect is issued with this decision.

COMMISSIONER

Appearances:

S.Lynch solicitor for the applicant

M.Seck of counsel, for the respondent

Hearing details:

2014.
Sydney:

March 18.

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